Human Nature, Happiness, and Lumpy Rewards
Taleb argues that the frequency of pleasant experiences can matter more to happiness than the size of a single reward. He contrasts steady small rewards with a windfall, and discusses how the sequence of gains and losses affects their emotional impact.
THE IDEA
Human Nature, Happiness, and Lumpy Rewards
Let me distill the main idea behind what researchers call hedonic happiness.
Making $1 million in one year, but nothing in the preceding nine, does not bring the same pleasure as having the total evenly distributed over the same period, that is, $100,000 every year for ten years in a row. The same applies to the inverse order—making a bundle the first year, then nothing for the remaining period. Somehow, your pleasure system will be saturated rather quickly, and it will not carry forward the hedonic balance like a sum on a tax return. As a matter of fact, your happiness depends far more on the number of instances of positive feelings, what psychologists call “positive affect,” than on their intensity when they hit. In other words, good news is good news first; how good matters rather little. So to have a pleasant life you should spread these small “affects” across time as evenly as possible. Plenty of mildly good news is preferable to one single lump of great news.
Sadly, it may be even worse for you to make $10 million, then lose back nine, than to make nothing at all! True, you may end up with a million (as compared to nothing), but it may be better had you got zilch. (This assumes, of course, that you care about financial rewards.)
So from a narrowly defined accounting point of view, which I may call here “hedonic calculus,” it does not pay to shoot for one large win. Mother Nature destined us to derive enjoyment from a steady flow of pleasant small, but frequent, rewards. As I said, the rewards do not have to be large, just frequent—a little bit here, a little bit there. Consider that our major satisfaction for thousands of years came in the form of food and water (and something else more private), and that while we need these steadily, we quickly reach saturation.
The problem, of course, is that we do not live in an environment where results are delivered in a steady manner—Black Swans dominate much of human history. It is unfortunate that the right strategy for our current environment may not offer internal rewards and positive feedback.
The same property in reverse applies to our unhappiness. It is better to lump all your pain into a brief period rather than have it spread out over a longer one.
But some people find it possible to transcend the asymmetry of pains and joys, escape the hedonic deficit, set themselves outside that game—and live with hope. Hope offers a way to live with rewards that arrive unevenly.
When to use it
Designing a reward system: Instead of one large annual bonus, give employees smaller, more frequent bonuses or recognition to boost morale.
Considering how a pattern of income or rewards affects your experience, alongside the other factors that matter in a financial decision.
Project management: Break large projects into smaller milestones with celebrations after each to maintain motivation and positive affect.
Planning several enjoyable activities across a month instead of reserving all recreation for a single occasion.
FROM THEORY TO EVERYDAY LIFE
In practice
Financial windfall vs steady income
Making $1 million in one year but nothing in the preceding nine years does not bring the same pleasure as having $100,000 every year for ten years. The steady distribution feels better due to the higher frequency of positive events.
Large gain then loss
Making $10 million and then losing $9 million may be worse than making nothing at all. Even though you end up with $1 million, the emotional impact of the loss may outweigh the gain, leading to net unhappiness.
A MOMENT TO REFLECT
Put it to work.
Think about your daily routine: Are you getting small, frequent positive experiences or waiting for a big event? How could you increase the frequency of positive moments?
Consider a situation where you experienced a large success followed by a failure. Did the failure overshadow the success? How might you restructure that sequence to minimize pain?
How can you apply the principle of spreading positive events evenly across time to your work or relationships?
CONTINUE THE CONVERSATION
Source texts
- The Black Swan The Impact of the Highly Improbable With a new section On Robustness and Fragility (Nassim Nicholas Taleb)